F3 is a successful long-term business focused on food products based on local and artisan ingredients, offering both retail shelf products as well as pre-cooked meals and their own dining out/catering option. The company has grown rapidly but is experiencing business hardships due to both external influence of economic factors and internal management and HR structural challenges. This report will investigate key threats to the company, modify HR strategy, and provide recommendations to strengthen the business.
The first threat to F3 is economic downturn, associated with the oil industry reduction in its home region of Aberdeen, Scotland. The company is reliant on a significant portion of profits in the local area, including its dining and catering as well as local and regional retail sides of the business. The local oil industry attracted foot traffic of business and work-related travel to the area as well as the inflow of cash to the local population, that chose to spend more on healthy artisan products from a known company in their hometown. However, as the industry shrank, people generally spend less on unique products that F3 specializes in, highlighting a key overreliance on local business.
The second threat is competition which directly taking away market share from F3 in some product categories. F3 was ahead of its time in offering organic and locally sourced products which are targeted towards health-oriented individuals. This trend has exploded in modern day and a significant majority of large corporations in the food industry as well as new market entrants are introducing new entries in retail, utilizing brand power and drawing away consumers. This issue will only continue to economically threat F3 unless strategies are undertaken to mitigate it.
Another notable issue for the business which remain a threat are excess costs, partially related to its HR strategy and maintaining unnecessary employees. Over the company does not seem to have streamlined operations. While Susan has notably attempted to cut costs, these have been in aspects such as compromising the company’s local sourcing strategy and not undertaking a comprehensive cost analysis of the company’s operations and assets. It is necessary for a business to maintain low costs while upkeeping quality to remain profitable and efficient.
The current stage of HR at F3 is lacklustre as in there is no consistent organisational system in place for this element of the business, which is surprising considering its size. The majority of HR decisions are placed on Susan and Mary. Susan has established a matriarchal method of leadership in the business, being engaged in every aspect of the company. Mary, who is Susan’s cousin has taken on more of the HR day-to-day management, attempts to follow a similar approach to leadership and management of compassionate matriarchy. The benefits of the current approach is that it creates a close, tight-knit team within the company. Management is aware of all ongoing HR decisions and participates to provide the best conditions for employees. This approach may be functional for small-scale businesses with few employees, that similar to F3 were largely all family and friends.
However, once the company has expanded and there are numerous hired workers, particularly those from abroad, it is vital to have an HR system in place. HR provides a consistent response to any staff-related issues, often maintaining a company-wide policy that employees know and understand. Furthermore, having a proper HR system in place can serve various functions such as processing any complaints or workplace conflicts (to prevent legal action), effectively deal with payroll-related aspects, and engage in the best hiring/employee management practices for the company. While implementing an HR strategy may bring some additional cost, the long-term cost saved will be worthwhile for the business.
Based on the state of the F3 company currently, using the value matrix approach, it would likely benefit the most from implementing a compliance-based HR strategy with support type of workers. This approach emphasises a limited scope of staffing and potential outsourcing. Implementation of strict rules and procedures in the firm that focus on error avoidance and structure. The majority of employees are contract or hourly pay which is the way it is currently (Wright, 2008). Compliance HR is preventative and reactive in nature, ensuring the business is compliant with all legal regulations and focuses on supporting the business rather than attempting to strategically expand it. Compliance HR is easier to implement with limited staff and technology, can be best used to report on the fundamentals of operations and finance, with other department managers doing their own recruitment and performance management (Batistic, 2016).
The core areas where F3 needs to improve is to streamline its operations to reduce costs and implement a successful HR system that would create structure and drive the business forward through employee performance and engagement. The first action would be to review the unique selling proposition for the company. Since disposable income directly affected local sales, the major source of profitability for F3 with competitors introducing more products in the sector, likely for lower prices, it is necessary to engage in cost-cutting activities for the company. This includes streamlining operations, finding methods to reduce costs by importing some products rather than relying on local sources, and eliminating redundancies that would drive down the cost of F3’s goods and increase margins slightly.
The review of the workforce calls for necessary restructuring and eliminating some positions. Some staff such as cleaning services can be outsourced for lower prices rather than maintaining employees and paying benefits. Streamlined production would result in elimination of some of the factory workers. It would be beneficial to use compulsory redundancy and break off 20% of the workforce (Ashman, 2016). Since the majority of these are hourly employees and low-level management, no severance packages would have to be paid. This will be a tremendous shock to the employees of the company, used to the comforting and matriarchal approach by Susan, but it is a necessary step to reduce costs. The morale of the remaining workforce can be raised gradually by offering incentives that would stimulate performance, such as small bonuses for hourly employees, promotion opportunities within the company, employee well-being initiatives, and benefits packages within the financial possibilities of the company.
However, it is critical to develop and implement a performance management system that would systematically evaluate performance of various departments and management, even if they are part of Susan’s family. Poorly performing managers should be incentivised, and if not successful, replaced. Susan built the business as a family-owned company but it may be viable to consider hiring trained professionals, particularly in the segments of management and HR which can bring the firm to a new level of performance. The newly integrated HR system should be clear in defining the role of every single employee and their responsibilities. An effective performance management initiative within HR then evaluates each employee based on their responsibilities and objectives, providing feedback, and creating organization-wide strategies that provide motivation and set goals (Bititci et al., 2015). This diverts away from the loosely based framework previously held by F3 where all decision, evaluation, and employee management fell on Susan and a small group of managers without any coherent structural components. Susan and other managers can continue practicing similar managerial styles in terms of camaraderie and connection with employees that inspire loyalty, but now with an evaluation framework in place.
The identified elements highlight several key organizational development issues. These include an absence of clear direction, lack of a coherent hierarchical structure, failure of existing systems to develop key competencies and behaviors, and a lack of communication/feedback structure (Kegan, 2017). F3 will have to undergo a significant change management process to become sustainable and efficient. A vital role of HR in change management is communication, implementation, and assessment of impact afterward. The change management model consists of 4 steps of define, plan, implement, and sustain. Define consists of clarifying roles, identifying changing, and establishing stakeholders and measures. Planning consists of conducting impact assessments, identifying risks, and creating plans for communication and engagement. Implementation results enabling catalysts and leaders, rolling out communication, and monitoring and managing resistance while mitigating risks. Finally, sustain monitors adoption of change and reinforces behaviour while measuring impact of change. Downsizing or reduction in force, which is the change management process that will occur at F3, is the most challenging to implement. Planning thoroughly is key while applying diversity concepts and dealing with the emotional/morale impact of the workforce in the aftermath (Managing Organizational Change, n.d.)
A wide variety of analytics can be used to determine whether the proposed changes are effective. From an economics standpoint, expenses should be monitored continuously to identify whether certain processes or cost-decisions negatively affect the company’s bottom line. Analytics can be used for elements such as ensuring timing and maintaining costs of shipping as well as optimizing internal processes. Importantly, the company should also use data for marketing and sales decisions to test new target markets or segments (Vidgen et al., 2017). HR analytics should focus on employee performance, investment necessary for employee training, and aspects such as employee ratings and turnover rates. These analytics aid in understanding the factors that influence employee performance, identifies candidates that best fitting for the positions and company, and can generate data to improve performance in the long-term (Marler & Boudreau, 2016).
As an inherent function of HR to be concerned with managing relationships and interactions between people, it also serves the role of an ethical compass in an organisation. Massive organizational change such as for F3, will create ethical dilemmas within the company and workforce. The need to streamline operations and thus reducing workforce carries an ethical burden as livelihoods will be impacted, and despite Susan’s best efforts, these elements cannot be avoided. Furthermore, HR is concerned with distribution of resources in the company, such as salaries, benefits, and others. When resources are scarce, some have to be taken away and it creates an ethical challenge of who should benefit and who will be negatively affected. F3 has faced legal action previously, and it is the role of HR to implement rigid policy under the compliance strategy which ensures legal compliance under labour law but also protects the company. There will be instances when certain standards, systems, and processes are potentially unfair to the regular employees but are set to sustain the company (Carter, 2015). Ethics should be considered in making structural and business decisions in a company at the HR and organisational level, to consider practical implications on employees and values of the company.
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